Month: January 2016

Should current oil prices continue to hold sway long into the new year, a gradual reduction of investments in crude oil exploration could be seen, particularly in domestic markets from oil producing nations such as the United States. Although logical on the surface, held back investments are not intelligent moves in the long run, as low prices will rule only the foreseeable future, and not the long term.

Paradoxically, the glut of oil would eventually become a liability should a stable price floor remain elusive. A prolonged drop in price could render much of the domestic oil production unprofitable, undoing much of the progress of the past few years. In time, as the prices rise again, a spike in prices will again manifest as the country once again becomes dependent on petroleum imports for energy. And while investments would eventually return, their production would lag too far behind demand to stabilize prices.

The shrinking of oil investments can lead to long term problems in domestic and global energy security. The 2015 World Oil Outlook predicts that, to prevent massive shortages, the global economy would need around $10 trillion of new investments by 2040.

Thus, to safeguard the continued stability of energy prices, investments in the energy sector must be protected. In the meantime, investors in oil production continue to play the waiting game, rolling back expansion without a price turnaround in sight. These stalwart companies and individuals would find that their risk-taking places them in a unique position of ensuring future energy security as the glut comes to its eventual end.

And while the oil market’s long night continues, demand slowly but surely begins to pick up.

Brian Alfaro leads Primera Energy LLC, a leading petroleum production company with significant interests in the Eagle Ford and Barnett shales in Texas. Visit this website for more updates on the energy sector of the U.S.